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Rewind 2010: Marico’s Saugata Gupta on the year gone & trends ahead

03-January-2011
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Rewind 2010: Marico’s Saugata Gupta on the year gone & trends ahead

Amongst the many things, slowdown saw many Chiefs of businesses – India and global – play a more active role in the communications function. What was it about the slowdown that made advertising more aggressive in 2010? In this conversation with exchange4media for ‘Rewind 2010’, Saugata Gupta, CEO, Marico Consumer Products, answers some of these questions.

Post the slowdown, we have seen business heads such as CEOs, MDs, take direct interest in the communications side of the business.
Any business, at the end of the day, is about acquiring and retaining loyal consumers and getting more business out of existing consumers. In a consumer-facing business, marketing has a key role to play, as it helps in generating demand. Many have understood this in the past, and now many more understand this. However, I must add that post the slowdown, another aspect has gained importance and that is of marketing developing accountability. Today, many things are measurable but the manner in which one is investing in marketing, the returns must be clearer.

Would you like to elaborate more on how one measures ‘accountability’?
For starters, it’s not necessarily about volumes and market share but about creating a combination of sustainable brand equity and of profitable growth of innovative stories. It’s not about short-term market share, because as the competitive structure changes and the country develops, the GDP grows and more players come in, it would all revolve around creating long-term sustainable equity. Therefore, it’s important to understand the indicators that attract consumers, and in the process ensure that marketing is much more accountable.

One would imagine that the slowdown changed a lot of things that we were doing as an industry...
Each downturn has its learning. In a growth scenario, there is a tendency to develop flab in various organisations. Slowdown, in that sense, had some positive spinoffs as well. In fact, we have seen robust organisations come out of the slowdown, much faster. When there is, what I call secular growth, irrespective of the quality of organisation, everybody grows. But slowdown was a test. First it ensured a much sharper focus in terms of cost structure and far more accountability. At the same time, even in the slowdown, there were organisations that did not dilute focus in terms of investing in innovation and talent. Second, the slowdown in a sense also meant moving forward quickly and learning from others. The key take off is that today, the industry is resilient and better prepared to tackle ‘vitality’, which I would say is here to stay for a long time.

And in context to communication with the consumer?
Any constraint forces people to look at alternative communication channels but given the way the trend is changing with the younger sets of population, and the way they use consumer information, the need to work with alternate media and alternate mode of communication is important. Many industries have adopted it better, but India has been a relatively slow mover in that. Especially in FMCG industries, where comfort is always in numbers and India being a mass scale market, obviously mass communication is still more effective in terms of pursuing good costs. That said, we need to explore more alternate media from a future viewpoint as well. Demographic profiles in the next few years would put even more importance on the younger TG, and therefore communicating and understanding with these people; investing on works and does not work is very important.

It also appeared that many brands, especially FMCG, increased their ad spends in 2010...
Let me put it this way -- 2008 was a year of high input cost and 2009 was a year of slowdown. Post slowdown, input costs went down and operating margins of companies went up, as obviously a lot of down-trading had happened. Significant portion of that extra margin got transferred either into advertising or into getting better values for consumer in terms of price offers etc. You must also understand that it is critical for companies to retain consumers because it’s more difficult to get back a lost consumer than getting back lost margins because margin can be handled through cost structure. Becoming greedy in the short-term is not a good idea and many companies did pass on values to consumers, which became a trend of sorts. Now as input costs are going up again, the pressure is on us to maintain the high margin. But sometimes, the margin is not sustainable. Then it needs to operate within a band, as long as there is no significance shrinkage. Just like when there is an input cost reduction, you do not pass everything to the consumer, similarly, when there is an increase, you can probably pass only a portion to consumer, as there is a threshold tolerance level. At present, there is a general realisation in FMCG companies that the larger investment future of consumption is good in India, so it’s important to invest in a brand and maintain consumer franchise.

That would question the cost cuts of 2009...
...My take is slightly different on that. Due to the meltdown in global markets, there was dependence on growth from emerging markets. The multinationals hence were making larger investments, behind innovation and growth in markets such as India and China. They did not cut down on investments. The market is going to be more competitive, as the growth story is here and nobody would want to stay behind in that, and this will be true for 2011 as well.

As we move ahead, what are your expectations from your advertising partners?
Great work. We see them as partners in our growth process; they should also see us as a long-term relationship, where we work together in delivering best in class work and accelerating growth rate. There is always scope for better work, but I also think that they should be a little more focused on innovative stories.

Any great work of 2010 you thought was brilliant?
Well, there was a lot of correct advertising that had happened in 2010. But examples of work that I thought were very good would be the Vodafone campaigns and Cadbury. They touch a chord.

 

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